Credit memo vs Refund Which one is true? Magento 1.9

Question

Im very confused about the difference between credit memo and refund. Magento documentation states the following :

A credit memo is a document that lists the amount that is owed to the customer. The amount can be applied toward a purchase, or refunded to the customer. You can print a credit memo for a single order, or for multiple orders as a batch, or group. Before a credit memo can be printed, it must first be generated for the order.

But when we try the feature, on a paid order, all we can do is a refund offline. There is no option whatsoever to credit customer account for a futur purchase. Its like if this following statement is false :

The amount can be applied toward a purchase

We couldnt find any reference on the Internet explaining how to apply the credit memo toward a purchase or attach it to the customer account.

Does this feature just not exists ?

Answer 1

Magento has two different ways to refund an Invoice.
The obvious way is to open the order and click on the Credit Memo Button at the top. On this view, you only see the Refund offline Button.

The second way is to click on the tab Invoices (In the Order view), then click on the row and there is another Credit Memo Button. If you click on it, it will look the same, except you see two Buttons: Refund Offline and Refund.

You have to know, that you are only able to Refunde "online" if you have a online Payment methods, like Paypal or Creditcard.

Answer 2

Magento default don't have online refund. For online refund, you need to go to payment gateway side and click on the refund option from the transanctions list. Magento only have offline refund feature, so credit memo can be generated on that behalf.

I hope its clear now.